Walgreens Faces 4 Questions on Its Future in Health Care

Less than a month ago, the private equity firm Sycamore Partners completed its $10 billion-plus acquisition of Walgreens Boots Alliance. Since then, Sycamore leaders have offered some details about their vision for the retail pharmacy giant, including:

• Plans to split Walgreens and its assets into five stand-alone companies to allow for focused management and evolution of each.
• Intentions to go private and restructure Walgreens to provide greater flexibility to address challenges such as declining sales and financial pressures and to focus on long-term improvements rather than short-term growth.
• Focusing on business evolution. Sycamore Partners, with its experience in retail, plans to drive changes over several years, making significant changes to improve performance before potentially divesting some assets.
• Enhancing health care services. The split aims to strengthen and better focus the operations of Shields Health Solutions, CareCentrix and VillageMD, allowing them to better serve the growing demand for health care and specialty pharmacy services.

How Will Health Care Consumers Be Impacted?

Some analysts and private equity watchdog leaders are concerned, however, about what isn’t being said about Sycamore’s plans and how health care consumers potentially could be negatively impacted.

The debt-heavy buyout raises fears of store closures, layoffs and potential bankruptcy, according to a statement from the Private Equity Stakeholder Project, a nonprofit that tracks private equity deals.

Walgreens stated last year that it planned to close 1,200 stores over several years, so consolidation always has been part of the company’s plans. Still, some wonder if the cuts may go deeper and how Sycamore will balance short-term financial objectives vs. long-term goals given its past deals.

Health care is about long-term health and maintaining people’s health over decades; private equity’s business model inherently is short-term based, said Matt Parr, communications director of the Private Equity Stakeholder Project. “They are looking to get a company profit off of it, exit the company in whatever way that is, whether it be bankruptcy or IPO or selling it off to another private equity firm,” Parr said.

Store closings could have a significant impact on underserved communities and have the potential to create more care deserts, said Michael Greeley, co-founder and general partner of Flare Capital Partners in a recent interview with MedCity News.

4 Questions on Walgreens’ Future in Health Care

1 | Will Walgreens follow Staples’ playbook as it restructures?

Mike Motz, former Staples CEO, has been tabbed by Sycamore Partners to replace Walgreens CEO Tim Wentworth. Under Motz’s watch, Staples shuttered one-third of its stores, Parr notes, cutting tens of thousands of jobs. The Private Equity Stakeholder Project is wary that if Motz follows the same playbook he used for Staples, thousands of Walgreens locations could close, tens of thousands of layoffs could occur, thus creating pharmacy deserts in neighborhoods already struggling with access to medication.

2 | How will patient access to Walgreens’ pharmacies be impacted by coming changes?

Cherokee Layson-Wolf, a professor in the department of practice, sciences and health outcomes research at the University of Maryland School of Pharmacy, recently told Healthcare Brew that her biggest concern is how the deal will affect patient access to pharmacies. For example, Sycamore may choose to consolidate pharmacy locations and rely more on central fill locations, Layson-Wolf said, which are facilities that fill and transfer prescriptions to pharmacies.

Walgreens has 11 such locations — which it calls micro-fulfillment centers — that send prescriptions to more than 4,500 stores, Wentworth said in the company’s Q1 2025 earnings call in January. At the time, Wentworth said he wanted to get that closer to 6,000 stores this year. More central fill locations could mean fewer pharmacies, which may affect a patient’s ability to see a pharmacist, Layson-Wolf said.

3 | Will separating Walgreens into five businesses pay off?

Flare Capital’s Greeley argues that disaggregating the company was the right move. Health care retailers have been struggling recently, and Walgreens’ retail business was pulling down high-performing assets like Shields and CareCentrix, he said. Warren Templeton, managing director of Health2047, the venture studio powered by the American Medical Association, agrees with this analysis. “Ultimately, the five businesses all have different margin profiles, cost structures and opportunities for success: the company never was able to capitalize on the reciprocal value between each of the businesses,” Templeton said.

4 | Can Walgreens overcome its leveraged debt?

More than 70% of the Sycamore deal is financed through debt, meaning that the private equity firm doesn’t have “much skin in the game,” according to Parr. The risks of bankruptcy are especially troubling, according to the Private Equity Stakeholder Project. In the first quarter of this year alone, 70% of large U.S. corporate bankruptcies involved private equity-owned companies, despite private equity making up only 6.5% of the economy.